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Fuel Taxes: Why Gas Prices Vary So Much

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Gas PricesYou’ve probably heard about the dirt-cheap gas prices in places like Venezuela, where citizens can fill up for mere cents a gallon. While it might frustrate Americans to know that gasoline is so cheap in some countries, they can take comfort in the fact that there are places where gas is much more expensive. I remember how expensive gas was 13 years ago when I was an exchange student in Europe. What some consumers pay at the pump in other countries far exceeds what we pay here.

But why the discrepancy? It is generally acknowledged that the biggest reason that gas prices vary so widely at the pump is to do with taxes. Many countries impose an excise tax on fuel sales, and, in countries that contain provinces and states, there might be additional taxes imposed at a more local level. Kiplinger recently compiled a list of gas prices around the world, and the top price on their list is Turkey, where consumers pay $9.96 per gallon. The lowest price on the list is Venezuela, where gas is $0.08 per gallon.

Taxes, Subsidies and Government Decrees

Fuel prices around the world are almost universally decided by governments. Sure, supply and demand have something to do with what we pay. But taxes, subsidies and government decrees can affect the price more than other factors. According to NACS, in the United States, as of the beginning of 2011, the federal excise tax on gasoline was 18.4 cents per gallon. Of course, states can add their own taxes to that; the January 2011 average was 48.1 cents per gallon for gasoline taxes. (Diesel carries a federal tax of 24.4 cents a gallon, and an average fuel tax of 53.1 cents per gallon, once state taxes are added in.) Some states even charge a sales tax on fuel sales, further boosting the price consumers pay at the pump.

No matter how much we complain about fuel taxes, though, other countries have it worse. With the exception of some countries in the Middle East and some South American countries, nearly everyone pays more than we do at the pump. Indeed, Canadians living in Ontario pay about 38% of the cost of their gasoline ($5.56 according to Kiplinger) in taxes. When you consider that Canada is a major oil producing country, providing the U.S. a great deal of the commodity, it seems strange that Canadians don’t pay less for gas than we do.

And, of course, European countries are known for their huge taxes fuel. Countries like Germany levy a fuel tax, and then require the payment of a value-added tax on the fuel itself, as well as the fuel tax. Norway, another country with a large oil export industry, taxes fuel heavily, with gasoline taxes accounting for more than 60% of the price. Sweden levies carbon and energy taxes on gasoline, and a VAT. Kiplinger reports that the French pay $4.50 a gallon in taxes — accounting for more than half the $8.29 per gallon price.

Subsidies from some governments mean that consumers get access to lower fuel costs. Rather that taxing gasoline at high rates, governments in Iran, Venezuela, India, Saudi Arabia, Mexico and a few others subsidize it to help keep prices relatively low. (Although it is worth noting that, even with subsidies, consumers in China, India and some other countries still pay more for gas than Americans.)

In some cases, the government sets gas prices. Saudi Arabia subsidizes, and it sets prices by royal decree. The Chinese government changes gas prices when there is a large enough shift in oil prices over a limited period of time. However, many of these regimes are wary of allowing prices to rise too far, since it could result in protests and discontent among the populace.

Other impacts on gasoline prices around the world include how far the gas has to travel, as well as demand for oil (including the rising demand for gasoline by a growing middle class in China and India), and political upheaval in oil producing regions. Because the U.S. taxes its gasoline less than most other developed countries, and because the U.S. gets a great deal of its oil from Canada and Mexico (#1 and #2 sources of oil imports to the U.S.), we are actually quite fortunate when you think of the price many others pay for gasoline.

(Photo: revtim)

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28 Responses to “Fuel Taxes: Why Gas Prices Vary So Much”

  1. Echo says:

    $0.08 a gallon in Venezuela? Wow, that’s crazy!

    Prices here in Alberta are about $1.25/litre, which I think works out to around $4.70/gallon.

    Definitely frustrating when they pull it out of the ground right here in our own Province.

    I must say though, prices aren’t THAT high when you consider that I spend about $100/month on gas, which is much less than 2% of our gross pay.

  2. mannymacho says:

    I think that is supposed to read “European countries are known for their huge fuel taxes.”

  3. Amy Saves says:

    $8.29 a gallon in France?! We should be grateful gas is not that high.

    • curtis says:

      we have oil in our ground – they have to buy it from other countries

      • Wiseguy says:

        True, but that doesn’t significantly affect the price. The difference is obviously tax, which is a voluntary imposition by the government. Take away $0.53 in taxes from a gallon in the U.S., and you’ve got around $3.50 per gallon. Take away $4.50 in taxes from a $8.29 gallon in France, and you’ve got $3.79 per gallon. Not nearly so different.

  4. Hunter says:

    We’re in a relatively good position compared to some. But hoe can the recovery continue with oil prices so high?

    The economy grows with access to cheap energy and shrinks with energy cost spikes. Some argue hat the global economic crisis was caused by $147 oil in 2008. I think this reasoning has more merit that imploding mortgages in Clevelans Ohio.

  5. David says:

    Yes, in most other OECD countries gas is 2-3x what we pay. This is an interesting source of info: http://www.nationsencyclopedia.com/WorldStats/WDI-transport-pump-price-gasoline.html. I think it’s interesting that Sudan and North Korea have more expensive gasoline than we do. The countries which have cheaper gas are generally poor, oil-producing dictatorships. Our fellow Americans really need to stop whining about penny increases in gas prices.

  6. zapeta says:

    We are lucky to have relatively low prices. When I lived on the Illinois/Iowa border I would buy gas every time I was in Iowa since the difference in fuel tax made the prices much lower.

  7. Rosa Rugosa says:

    What an intersting article! We never had a clue that most of our oil was imported from Canada & Mexico; we had always assumed most of it was from the Middle East.

  8. Romeo says:

    Yep, I too remember about ten years ago when gas prices were super high when I lived in Italy. I couldn’t image what they pay now. I bet one thing hasn’t changed, though. Since Naples, Italy have many hills because of the mountains and volcanoes, the residents there simply shut their mo-peds and cars off when declining from the top of the street to the bottom, lol.

    Romeo

  9. Strebkr says:

    At least our gas taxes go towards something we are using when we drive. Federal & State highways, roads, bridges, etc. Its one of the few taxes I don’t mind. I could do without some of the other services our government provides with my tax dollars.

  10. Alan says:

    I heard on the radio today that the US gas prices are on the rise due to the dollar weakening. Same money buys less oil to turn into gas.

  11. It is very sad to see that in some countries like Iraq and Iran there is so much oil that it is cheaper than water and in the other there is no oil and we are dependent on the Middle East for Oil.

  12. Nate says:

    Bull… Don’t care how much other countries pay we have the means to benefit from cheaper oil or gas prices we are just to hung up about possible drilling accidents. Cheaper Oil just doesn’t benefit our vehicles but will benefit our entire economy thus opening the doors for new growth of alternative fuels. We need to wake up (the American people) and do the right thing and allow our oil companies to produce product from our own supply. How many American jobs would open? How many companies or industeries would thrive? it would not only help our economy but would benefit world wide econonmies. I don’t care if other countries have higher gas prices, WE DON’T HAVE TO! For pete sake people progress be leaders don’t follow and be content. Be thankful we live in a country than can provide for it’s self we just choose not to do so. How smart is that?

  13. skylog says:

    i will only say this. many european countries pay a great deal more for gas. as a result, they generally are very much ahead of the united states in renewable energy and have much better mass transit systems. i barely drive, so i am no doubt biased, but i would gladly pay a great deal more to get where this country needs to be in those respects.

  14. govenar says:

    Why do fuel taxes exist anyway? To dissuade people from using fuel? (why?)

  15. Shirley says:

    Thank you; this was a very interesting article. I didn’t realize that the U.S. imported so much of its oil from Canada and Mexico. Gas here is $4+ per gallon now and expected to hit $5 by summertime when the demand is even higher.

  16. We’re actually lucky compared to the rest of the world in the United State b/c our taxes on gas are fairly low. Obviously we can’t compare ourselves to Venezuela, but on average we can fill up for pretty cheap. As we move to more fuel efficient cars, however, the tax revenue from gasoline taxes should decrease. Since that’s what is used to build and maintain roads, it is conceivable that the gasoline tax would have to increase or some other form of taxation would have to be put in place so electric car owners have to pay their fair share. That’s not something most people think about.

    • COMMON CENTS says:

      There are already plans to tax electric vehicles by the odometer. You will pay when you buy your license tabs.

  17. Joshua Ray says:

    In the end, all of the goods sold in the united states prices are based also on the price to ship them. Which we, the consumer, pay taxes on. Diesel being more expensive than gas, think of how much your product should actually cost. You pay the tax on the gas, and in all honesty, are paying more tax on your food. But it’s okay to give money to a huge organization so they can give their CEO’s more bonuses. The whole thing has gotten out of control. Yes, it’s not the worst here, but for some of us it’s to the point where there is no end. Very many of the “young” people in this country work for tips, including me, and there are days where I might make 15 dollars. After I spend 7 in gas to get there and back it’s 7 dollars for food, bills, etc. Something should be done because I agree with Hunter (and to an extent Nate), Gas generally affects the economy and our lives. Anyone can come to the states… Gas might not be cheap where you live. We should be able to move to where it’s cheaper, but the standard of living is good here. Probably much better than Venezuela. Anybody feel this way?

  18. reba says:

    I can’t believe how complacent are most of the comments to this article. You know, it is okay to GET ANGRY because we are being RIPPED OFF! What we have is a world monopoly on the price of crude oil which means the powers that be (namely OPEC countries) get together and decide how much they can get away with charging everyone for their product. It doesn’t seem to matter how much it actually costs each country to pump oil out of the ground. It certainly doesn’t cost the same amount to harvest oil in Venezuela as Canada, or Mexico as the U.S. So if the monopoly were broken, we would have “free market” oil which would benefit Americans. Standard business practice means cost + some profit = selling price which is usually no more that double the cost. I wonder how much outrageously unfair profits are being made by Venezuela, Mexico, and the Middle East?

  19. iooo says:

    EU should lower gas taxes imediatly we are subsidizing the rest of the world by undermining our economy over 80 $ a barrel people start saving gas no matter the taxes ,after that gas prices lower the economic growth so basivly EU is cutting the branch unde it’s feet you can’t have an eastern european country with gas prices twice the US it’s a crime and also for spanish portugheze hard hit by the crisis to pay more than double EU has a lot of room to reduce gas prices not in half but a third is posible ,offcourse the next day a barrel will cost at least 5% more but fuck it let the rest of the world share the burden

  20. High Milage says:

    That sounds so nice, but in reality we the American People should NOT be Taxed at All.Our goverment spends money like it is going out of style.Our goverment should be less at the pump and stay out of our wallets.

  21. john v says:

    We can have obama to thank for high gas prices. It is he who wont drill and has shut down drilling locations to please the evironmentalists. So of course this ends up hurting the whole economy— obama does’nt understand this or he refuses to influence the oil industry because he doesnt know how to. When bush left power gas was on average $1.80 a gallon.

    Get rid of Obama people!

  22. COMMON CENTS says:

    WHAT U.S. GOV WILL NOT EVEN CONSIDER… U.S. GOV JOBS PROGRAM TO DRILL IN THE USA.. BUILD/REFINE AND SELL THE GAS TO US PUBLIC AT COST! NOT AT GLOBAL PRICES! THE OIL COMPANIES CAN SELL THIER OIL OVERSEAS.
    THIS WILL NOT HAPPEN BECAUSE THEY WANT US OFF FOSSIL FUELS AND THEY WANT THE MONEY IT GENERATES. IF THEY REALY WANTED TO SAVE THE ENVIRONMNENT THEY WOULD INVEST IN THAT CAR THAT TURNS TAP WATER INTO HYDROGEN TO POWER THE ENGINE.

  23. Dave says:

    Yea,when Bush left office,our gas was $1.80.
    But our economy was bellyup!
    Stockmarket had crashed,and the monies were lost foreever without a trace.


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